Detroit automaker GM has cut its 2024 EV production guidance by up to 20pc, citing constrained demand, as the firm says greater caution towards EVs is now favoured by capital markets.
Speaking at a Deutsche Bank auto industry conference, GM CFO Paul Jacobson acknowledges a trend of investors rewarding OEMs for caution regarding EV production targets, which he says is a step change from previous market conditions where unrestrained commitment to EVs saw automakers rewarded with valuation boosts.
And Jacobson says this trend lies behind GM's decision to pull back its guidance by as much as 20pc for full-year 2024.
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"Most prognosticators were thinking that the EV market would be up to about 10pc of total autos [in the US]. We still see it trending kind of around that 8pc level," Jacobson says. "As a result, we have talked before about 200,000 to 300,000 EVs this year."
"We are actually going to trim that to 200,000 to 250,000. So, at the lower end of that, I think it reflects the momentum that we have in the business," Jacobson says.
Jacobson maintains the revision of the guidance is "100pc demand driven," adding that the firm is is still on track to produce up to 300,000 EV units after "overcoming [Ultium] module issues" earlier this year.
And the CFO also reveals that, despite GM's repeated mantra of matching EV production to demand, GM's production capacity has at times had the ulterior motive of responding toinvestor sentiment.
"What we do not want to do is get in this trap of, I think, the market — a few years ago or even more recently than that — had said, 'you have got to produce more EVs if we are going to ascribe any value to your company.'" Jacobson says.
Indeed, in a move that signals a reversal of the trend Jacobson identifies, GM stock hit a twelve-month high after the company said it would produce fewer EVs. With the curtailed targets, investors are likely encouraged as GM now looks set to reduce EV inventory and overall losses with fewer loss-making EV units.
"We do not want to end up in a position where we give out a production target and then we just blindly produce and end up with hundreds of thousands of vehicles in inventory because the market is just not there yet," Jacobson adds.
Adding weight to Jacobson's hypothesis, GM and Detroit rival Ford have previously seen boosts following row-back on their EV targets, such as when Jacobson's firm committed to hybrid compliance vehicles at the start of this year.
However, GM has repeatedly said that central to reaching profitability on its EVs is reaching sufficient scale, with Jacobson saying of the firm's variable profit margin improvement throughout 2024, that "about 60pc of that was driven by scale".
The CFO says, however, that GM's target for late 2024 positive variable profit remains unchanged despite plans to manufacture on a smaller scale, although the company is still calculating potential consequences for its cost structure as a result of recently introduced 100pc tariffs on certain Chinese-made battery components.
"I do not think so," Jacobson says when asked if the tariffs will affect GM's EV profitability roadmap.
He adds, however, that "we have talked about having LFP chemistry in the Bolt". "So, there is some impact on that project. We are still working through to assess what the final impact is going to be in terms of how we source and how we build that vehicle," he cautions.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
